Medicaid Spending: Mo’ Money, Less Problems?

States of the Union are getting more Medicaid money and spending it just as liberally, proving that for all the things that go wrong, at least one is going completely right. Prior to the Affordable Care Act, Medicaid had consistently taken up a substantial chunk of state spending. It was states’ largest budget item in the 2014 fiscal year – which ended on June 30th for most states –, compounding a tad more than a quarter of all state expenses. The biggest spending category exclusively funded by states, by the way, was still elementary and secondary education at 24.2%, as compared to 15.3% for Medicaid.

It’s not that Medicaid expenditure didn’t increase in fiscal 2014. Not only it did, but it rose 11.3% – the most of all states’ budget areas. However, most of it was on the federal government’s dime. The healthcare reform not only made Medicaid accessible to more people, but it reimbursed states 100% for new enrollees – slated to be phased down to 90% by 2020 and beyond. Medicaid federal funding went up 17.8%, while the states’ contribution only increased 2.7%. “The large increase in federal funds to states in fiscal 2014 was almost solely due to additional Medicaid dollars, mainly resulting from the expansion of Medicaid in a majority of states under the Affordable Care Act,” the National Association of State Budget Officers (NASBO) said in a report released November 20th. “While federal Medicaid funds to states increased $41.8 billion in fiscal 2014, all other federal funds to states are estimated to have declined $3.4 billion.”

States have depended less on federal funds after the United States stimulus plan expired and Congress approved the sequester spending cuts. Federal funds made up 34.9% of state spending when the stimulus plan's infusion of cash ended in fiscal 2010; federal funds reverted to 30.3% of state spending in fiscal 2014. According to NASBO, spending in nearly all budget categories gained slightly more ground during the past fiscal year; only the ‘all other’ and public assistance categories decreased. Higher education spending went up 3.7%, corrections rose 4%, and transportation increased 2.7%. “Looking forward, states remain concerned about both the short- and long-term outlook due to increased spending demands, recent volatility in states revenues, and uncertainty surrounding future federal fiscal policies,” NASBO said.

Funding and spending are not the only things that have grown. Medicaid enrollment increased 1.5% on average in fiscal 2013, and it is expected to average 8.3% across all states and is projected to rise by 13.2% in fiscal 2015 – including both states that have expanded Medicaid under Obamacare and those that opted out of expansion. The report states that “the implementation of the Affordable Care Act has greatly increased the number of individuals served in the Medicaid program in 2014 and thereafter.” Medicaid eligibility expansion will add about 18.3 million people by 2021, according to the Centers for Medicare and Medicaid Services’ Office of the Actuary.